American politics

Measuring poverty

Welfare works

I COMPLAINED about the Census Bureau's faulty methods for measuring poverty in September, so I'm very glad to report that something is being done about it. Revised numbers that take into account previously excluded forms of assistance, such as food stamps and tax credits, as well as regional variation in the cost of living, show that the number of Americans living in poverty has increased less than half as much as the September report indicated. Writing in the New York Times, Jason DeParle, Robert Gebeloff, and Sabrina Tavernise report:

One alternate census data set quietly published last week said the number of poor people has grown by 4.6 million since 2006, not by 9.7 million as the bureau reported in September. At least 39 states showed no statistically significant poverty growth despite surging unemployment, according to an analysis by The New York Times, including Michigan, New York, New Jersey, Ohio, Tennessee and Texas.

That's good news! It's better to measure things like this correctly rather than incorrectly, but sometimes stalwart supporters of generous anti-poverty programmes defend flawed measures that overstate the number of Americans living in poverty. My sense is that it is better to get as accurate a picture as possible, so that it is possible to show just how effective anti-poverty programmes really are. Who wants to throw more money at programmes that don't keep anyone out of poverty?

The Times nicely illustrates how the standard measures fail to reflect the success of the safety net in rescuing Americans from the cruel indignities of real poverty:

In Charlotte, Angelique Melton was among the beneficiaries. A divorced mother of two, Ms. Melton, 42, had worked her way up to a $39,000 a year position at a construction management firm. But as building halted in 2009, Ms. Melton lost her job.

Struggling to pay the rent and keep the family adequately fed, she took the only job she could find: a part-time position at Wal-Mart that paid less than half her former salary. With an annual income of about $7,500 — well below the poverty line of $17,400 for a family of three — Ms. Melton was officially poor.

Unofficially she was not.

After trying to stretch her shrunken income, Ms. Melton signed up for $3,600 a year in food stamps and received $1,800 in nutritional supplements from the Women, Infants and Children program. And her small salary qualified her for large tax credits, which arrive in the form of an annual check — in her case for about $4,000.

Along with housing aid, those subsidies gave her an annual income of nearly $18,800 — no one's idea of rich, but by the new count not poor.

“They help you, my God,” Ms. Melton said. “I would not have made it otherwise.”

Welfare works! In addition to showing that anti-poverty initiatives actually keep people out of poverty, improved measures give us a more accurate picture of the distribution of poverty and near-poverty, providing policymakers intent on intelligently shoring up the safety net a sound basis for doing so.

But what about all those poor people with Xboxes?!

While most scholars have called the fuller measure a step forward, Robert Rector, an analyst at the Heritage Foundation, argues that both census counts — old and new — sharply overstate the amount of deprivation in the United States. In a recent study, he cited government data showing many poor families had game systems like Xbox.

There is very little public support for programmes that would indefinitely provide assistance to households perfectly capable of economic self-sufficiency and full of modern conveniences. For my part, I favour fairly strict limits on the eligibility period for unemployment benefits, and fairly stiff job-seeking requirements for able-bodied, working-age recipients of public assistance. And I think this is the prevailing opinion. But recessions happen. Millions lose their jobs and can't easily find new ones. A lot of these people, like Ms Melton, really do need help, and they ought to get it. Who cares if the likes of Ms Melton bought her kids an Xbox a couple Christmases ago, before she lost her job? That doesn't mean she can now afford to feed her kids. It's hard to see what that has to do with anything.

RR, WIC and food stamps are complementary in a way that makes some sense. WIC provides dairy to pregnant women, infants and young children so that nutrients needed for pre-aolescent children are chosen separately from the rest of the food budget. I had the same instinct when I first heard about it but it isn't completely without reason.

One reason we're skeptical about big government is that we know how hard it is to understand the choices individuals make from 3000 miles away. We probably ought to be just as skeptical and for the same reason of our own blog comments.

See that poverty level single mom making only $15,000 per year? Let's increase the $18,000 per year medicaid she receives..­..wait that doesn't count as income. Let's increase the $6,000 per year food stamps (EDT) she receives..­..wait that doesn't count as income. Let's increase the $2,000 per year free school lunches her kids receive...­.wait that doesn't count as income. Let's increase the $7200 per year AFDC cash payments she receives..­..wait that doesn't count as income. Let's increase the $3000 per year WIC she receives..­..wait that doesn't count as income. Let's increase the $12,000 per year housing (section 8) she receives..­..wait that doesn't count as income. If we did measure all of these items we would find that the working middle class is poorer than the none working welfare class.

If it weren't for the fact that your annual estimate of the dollar amount of benefits received by an average welfare person are inflated above any figures I've ever seen, the fact that many welfare programs have employment-related requirements, the fact that many of the poor DO work, and the fact that one can always find examples of people abusing the system because hey, we live in the real world, you'd have an excellent point.

Reading that story about Angelique Melton, I came away thinking, "we have that many welfare programs?" We need "food stamps" and "nutritional supplements" administered by two separate agencies?

Shouldn't eliminating this bloat be a bipartisan cause? But then again, the left would probably think the right is trying to reduce benefits and the right would probably think the left would just reintroduce more programs. And they'd probably be right. Maybe we need a welfare commission.

Are you being derisory of her, or of the wages paid in the US for entry level work? I can't tell for sure. She is actually working, trying to provide for her family, at one of our big corporations, and you would have her, instead, selling chiclets on the streets of Mexico?

By the way, "shed" (she would) be paying Social Security and Medicare taxes on those $7,500, unlike the money over $110,000 that I earn.

Can't anyone see that the future of the United States relies on Ms. Melton and, particularly, her children?

100% agree. It is funny that people on both sides of an issue get so invested in the extent of the problem rather than whether, where said problem exists, it is possible and worthwhile to do something about it.

Most of my experience with advocacy came around government programs for people with developmental disabilities. At some point, leading up to the time when I became involved, the measured prevalence of autism increased by an order of magnitude. The explanations were either that a larger portion (possibly over 100%) of autism cases were being diagnosed or that the prevalence of autism was somehow increasing. I found it very odd that autism advocates were so outspoken and certain that the change was in frequency not frequency of diagnosis. At least by my logic, if autism is really 10 times as likely as it was 10 years ago, then we'd better get used to doing a lot less about it.

But I am, myself, a little bit aspy. Based on both sides of the debate it must be clear that if there are 10 times as many people with autism then we should be spending 100 times as many resources on mitigation. I'm still waiting for the debate to turn to "is any of this stuff we do about autism helping people who have the diagnosis?"

From a purely "bread and circuses" perspective, the investing class might want to consider subsidizing XBoxes and the like in order to keep the serfs placated.

You don't want them thinking too much about where all that economic growth over the last few decades went, especially as they juggle (or more likely, search for) multiple jobs in an effort to procure luxuries such as health care or heat in the winter.

Consider: If a bunch of irritated liberal arts majors can cause a bit of a hoo-hah with OWS, imagine what some large multiple of truly pissed off working poor folks might do...

(totally unrelated aside: while "Reply" is pretty cool, I kinda miss "Preview" to double-check formatting and the odd typo)

Exactly. There is a very narrow list of items that are eligible to be purchased with WIC benefits.

RR, the existence of multiple welfare programs helps direct benefits to specific subsets of the poor depending on their respective needs (do my unemployment benefits cover my food bill, but not my utilities? I don't need SNAP or HUD vouchers, I need TANF benefits), which likely minimizes wasteful spending and increases effectiveness. However, the fact that all of the different welfare programs are administered by multiple federal agencies very likely does increase admin cost and reduce effectiveness; a single "Office of Social Welfare" would be great.

The problem with contemporary discussions of welfare reform lies in the fact that the different ideological camps have already decided what such reform should look like when they come to the table to discuss it. In general, the right seems to hold that welfare reform always equals a reduction in total spending on public assistance programs, while the left usually holds that reform=increasing spending on welfare progams. Reform should instead be focused on maximizing efficiency; for any particular program, this could mean spending more money, spending less money, or eliminating the program outright.

Who cares if the likes of Ms Melton bought her kids an Xbox a couple Christmases ago, before she lost her job? That doesn't mean she can now afford to feed her kids. It's hard to see what that has to do with anything.

Just like a business, assets like those can be sold off.
Xboxes and the monitors need electricity to run.

Perhaps doing away with the Xbox and visiting the library for
books/educational items might be a direction parents might want to push their children towards?

NAH!

Any sightings of the Mr. Melton(s)?

We Are All Mr. Meltons Now!
(stolen from We Are All Keynesians Now.)

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I see more than 1/2 the unemployed are no longer getting any unemployment benefits.

For the record, one of the main reasons that the old poverty measure continues to be used is that its primary purpose is establishing eligibility for various programs. The census bureau has long published alternative statistics on poverty as a supplement, though these statistics come out with a bit of a lag. Even these adjusted statistics have a large number of faults read anything serious on poverty and there is a large number of different measurements used to capture different aspects of the problem

Despite the fact that the census and academics have been publishing alternative measurements for years, for some reason the media seems to pile on the flaws of the existing measurement for measuring poverty every year, despite the fact that it is quite clearly stated that this measurement is used for eligibility services and other measurements are published. What's new this year is that the updated statistics are something of a finalized form, back in the 90s a report was published on the flaws of existing procedures and since then they've been tweaking it.

Also, for the record, AFDC was ended back in 1996, it's a defunct program. Cash assistance, such as the old AFDC program or the modern TANF are also counted in the official poverty measurement. It's primarily in kind benefits, such as food stamps, WIC, or Medicaid that are not counted in official statistics. Of course, since the US supplies more in kind than cash assistance, this results in some real flaws in the measurement if it is used for anything but eligibility purposes. For some reason however, American politicians and voters favor in-kind over cash assistance, despite its inefficiencies.

Kudos on a good post though, one of the better established social science facts is that welfare does work to alleviate poverty. I'd also add that it is quite well established that the work disincentive effects are very small for welfare, programs with sharper means testing, such as Medicaid or disability insurance, display much more powerful work disincentive effects. The evidence seems to indicate that the income effect does next to nothing to discourage work at these levels, it is badly designed means testing that does this.

Also, there is little evidence that the poor spend substantial amounts on entertainment, the estimates I've seen are all in the single digits with living expenses eating up the vast bulk of income. It's hard to see how an amount that is less than one month's rent for most of these families would make their lives better if they instead spent it on something aside from entertainment. Of course, part of the problem is that programs like Medicaid have asset limits that tend to discourage saving, a few thousand dollars isn't enough to self insure so a wise poor person will probably blow excess money on an x-box rather than on savings for a rainy day. This is a problem with strict means testing rather than anti-poverty programs per se.

7500? Really? What is she working 5 hours a week? If 7500 is the best she can don working full time then she should seriously consider braving the rio grande and going to work in a maquiladora or sell chiclets on the streets of Mexico, shed do better.

Yes, but those assets are not properly hers. They belong to her children who are in no way culpable for their situation. The proper business analogy is to tapping employee benefits, say by delays in vesting, to provide quick liquidity.

@DP, you miss my point. If a mother can't get milk because she doesn't have the money, just give her more money (a general tax credit). No need to earmark it for milk. If the problem is that she won't get milk even if she has the money, then it's not a problem that only affects the poor so we should have universal milk vouchers.

"the existence of multiple welfare programs helps direct benefits to specific subsets of the poor depending on their respective needs..."

The need is money. Money can pay for food, housing, utilities, transportation, education, etc. You don't need separate programs for each of those unless you have some other social goal and even then vouchers can work better than running housing projects.

@DP, if the issue is money, a tax credit should work just fine. If the issue is mothers and children not eating right for other reasons, I see no point in means-testing it. That changes the problem from one of poverty to one of semi-voluntary malnourishment and that may call for a completely different set of policy solutions.

If autism is 10 times as likely as before, we should do proportionately less, or spend proportionately more? Not necessarily. Rather than pension off all aspies, we could focus resources on early diagnosis and intervention, so that they could receive specialized training and be productive. An aspie diagnosed at 12 still has lots of options. One diagnosed at 40 is probably screwed.

My information may not be current, but I believe that there are or were two reasons for help in kind rather than cash.

1. Surplus items [perhaps because of price supports] such as cheese have been given to the poor.
2. Alms for the poor also equals alms for the private sector when people have their income directed to milk companies [etc.].

In addition, Keeping people from spending tax-payer alms on lotteries, booze, etc. is actually a good idea for all concerned [except industries such as gambling and booze].

Education needs to be better and to have more generous support. Better education should mean a better job at better pay, better life skills [such as planning, money management, child training, nutrition] etc.